It’s All About Supply and Demand with Earning Income

I was talking with a friend recently about the topic of intelligence and how it doesn’t matter as much as many people think when it comes to financial success. His perspective was that the more intelligent someone is, based on test scores and other discernible measures, the more successful that person would be. My view is that while having a certain level of intelligence is probably necessary for success in many endeavors, at some point there are other variables that come into play. Such as focus, persistence, interpersonal skills, and even other forms of natural talent.

Now, to be fair it wasn’t as black and white as that in our conversation. But generally, I think that being bright is just one variable that comes into play in terms of financial success – and it can be overwhelmed by other variables in some cases.

Well, I found an example of this that’s interesting. Think about the average salaries of professional athletes. This article from USA Today shows the average annual salary for the major professional sports in the U.S., and the results are eye-opening.

Of the top 4 (I’ll exclude soccer as it’s not really a major sport here in the U.S.), basketball has the highest annual salary at $5.15 million. The lowest of the 4 majors is football, with a $1.9 million average. Not bad!

The two in the middle were baseball and hockey, at $3.2 million and $2.4 million respectively. Let’s take baseball as our specific example we can focus on. At $3.2 million per year, the annual income of baseball players is pretty darned good!

Looking at this further, we can break this income down to the following approximate rates

$267,000 per month

$8,800 per day

$365 per waking hour (or $1,100 per hour for an 8-hour day)

If we look at it differently, such as based on a per official game played basis, we would still see impressive rates. Based on a 162-game baseball schedule (excluding spring training), this comes down to nearly $20,000 per game.

How would you like to show up at work knowing that you’ll get paid $20,000 for your efforts?

Tying this back to the debate I had with my friend, please tell me how this relates to having “intelligence”?

I see this as a clear example of how there are often many other factors that can influence one’s success.

Special natural talents

Ultra-specific skills

Solving an unmet need

Of course, I’m sure that natural talents aren’t the only thing here. My guess is that many ballplayers have natural talent, but the differentiating factors just might be some of those other factors we mentioned before would come into play here too. You know: working hard, relentlessly pursuing success, tons of practice/effort.

Where this leads to me is the idea that simply being smarter than the next person doesn’t automatically elevate someone to exceptional financial performance. Rather, it’s harness other talents and cultivating skills or providing service that meets a need that the market will pay for. Supply and Demand at work! And then, working really hard for it.

When I was right out of college, I didn’t get any of this. It took me years to come to this way of thinking about growing net worth, but better late than never

My Questions for You

What do you think about the idea that there are plenty of other attributes that can be more important to financial success, beyond intelligence and academic accomplishments?

What factors have truly led you to your biggest financial success? It doesn’t matter if these are grand accomplishments or modest – you must have done something to reach this success!

On a side note, can you imagine earning $365 per waking hour? Wouldn’t that be a total game changer?

Comments

I think there’s little relationship between intelligence and financial success. Boldness, being highly personable, persistence, extraordinary talent or size (your athlete examples), being aggressive, and willingness to elevate making money above all else would each be far more related to financial success than smarts. See The Man in the Gray Flannel Suit.

There are brilliant people in low-paying professions. Just because you’re incredibly intelligent does not mean you won’t choose to work as a librarian, for example, which is traditionally low-paying. Are we saying that nurses are not as intelligent as doctors? Nurses make far less than doctors, but I am very thankful that there are many intelligent nurses!

Mrs. Warrior came from a well off family. Me, not so much. What took some time for her to realize is the difference between hard workers, smart workers and those that are both.

I think those that fall into either hard or smart categories often think the opposite category deserves more than they work for. The ones who fall into both categories or those that are applying both practices often succeed more often and faster.

My point being that, yes, it does take a lot of different attributes to increase the supply of income. No perfect recipe, but a lot of attributes ends up bringing better odds of success.

I don’t know if you have read Thomas J Stanley’s – The Millionaire Next Door…there is a whole chapter dedicated to intelligence and wealth. Short of it, there is very little correlation thank God! Infact he points out, from his sample and millionaires he interviewd, C-students are more likely to make the millionaire cut than A students. I guess they work harder, have more grit and certianly have a point to prove.
To borrow from Warren Buffet, “We don’t have to be smarter than the rest. We have to be more disciplined than the rest.”

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Disclaimer

We are well meaning folks that are not investment professionals or financial advisors. Please feel free to have fun here, and take this information in the spirit of entertainment, as it is not financial or legal advice, For that, seek an appropriate professional. Your actual financial decisions are your own responsibility. Thank you.